Independent Retail

Michael Fallon Excerpts

Tuesday 4th February 2014 Westminster Hall

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I congratulate the hon. Member for Sefton Central (Bill Esterson) on securing a debate on this important subject. We certainly recognise the value of the whole of our retail sector to our local and national economies. It employs some 3 million people and contributes around £80 billion to gross value added—almost 6% of our economy. Retail is a significant contributor to self-employment and independent shops are themselves often crucibles of entrepreneurship and innovation.

Research by the Centre for Local Economic Strategies discovered that for every £1 spent locally, around 50p to 70p re-circulates back into the local economy. Local shops provide hundreds of thousands of flexible jobs, particularly for young people and those who juggle other commitments such as child care. They are important hubs of social interaction and can provide vital services to their communities. Many operate in the convenience sector, which has seen real growth—there are now nearly 50,000 convenience stores on the UK mainland. The convenience sector is worth some £35 billion in turnover, adding real social and economic value to communities. More than three quarters of shops in the sector are independent, and almost three quarters of owners, interestingly, are the first generation of their family to own and run a business in the UK.

The economy is now growing for the first time since the recession, and the retail sector is contributing enormously to that. Significantly, it is small stores that are driving much of that growth. Figures from the Office for National Statistics show that small stores are now seeing annual growth of some 8%. Figures released by the British Independent Retailers Association on 31 January show that more than half of independent retailers have had their best average growth since 2010. Nearly two thirds of respondents to BIRA are confident or very confident about the year ahead, and confidence levels are at their highest since 2009.

Our habits as consumers are changing. We are using local shops more—including independents—to top up our supermarket shopping. Independent shops make our high streets, town centres and local shops more diverse and vibrant. Shopping locally has a positive impact on the local economy.

As the hon. Gentleman said, the independent retail sector has faced challenges. It is simultaneously adapting to massive structural challenges driven by changes in consumer lifestyles and preferences, the impact of new and emerging technologies and the constant evolution in technology usage. Modern lifestyles demand a much more flexible and fragmented shopping style that combines physical with online retail, and leisure and convenience shopping. Furthermore, the shift to shopping online is reducing some retailers’ need for large and costly physical stores, as well as creating the need for new and different design roles such as web design. Technology is driving change—tablets and smartphones are making it easier for consumers to buy online and in any location, and new delivery options such as “click and collect” are reducing the problems customers face with home deliveries.

Verdict Research is predicting that as confidence in the economy grows and the population grows, consumer spending will increase. A bi-annual survey of 500 small businesses conducted by Aviva shows that they have a more positive outlook for the first six months of this year, compared with two years ago. Retailers that have a distinctive brand, focus on their customers and are well run are still managing to grow. That is true of independent retailers as well as larger ones, and there are many such examples from around the country. The hon. Gentleman referred to one such small business in his constituency to which he has given his support: Gentle Cosmetics, which has recently opened a store after successfully trading online.

We are seeing increases in local shopping because of consumer demand. Research by the Association of Convenience Stores shows that the fruit and vegetable sector has experienced considerable growth as people move away from doing one big weekly shop, and are instead increasingly using local stores and shopping more often.

I turn now to some of the issues the hon. Gentleman raised. If I cannot cover all of them, I hope he will allow me to write to him in more detail. I will first say what the Government are doing to help independent retailers. As he referred to, the autumn statement announced the biggest business rates support package for 20 years, including capping the retail prices index increase in business rates at 2% next year; doubling the small business rate relief for a further year, to 31 March 2015, which will benefit over half a million small businesses; a business rates discount of £1,000 for smaller retail premises for two years, benefiting around 300,000 shops, pubs and restaurants; a 50% discount for 18 months for new occupants of property that was previously vacant; and allowing businesses to pay their rates bills over 12 months, which will help every firm with their cash flow. In the spring we will publish a discussion paper on options for reform of business rates administration.

We have been working with the Department for Communities and Local Government on the town centre support package, which was launched on 6 December. That package includes a number of initiatives on car parking, a review of business improvement districts, consultations on new permitted development rights and other planning reforms, and a call for evidence on the red tape that could be hindering high street revival.

[Bill Esterson]

Before the Minister moves away from business rates, does he recognise the calls from a significant number of business organisations and individual businesses for a complete overhaul of the business rates systems? Bearing in mind my comment about business rates being from another time, what are his views on that issue?

[Michael Fallon]

I recognise the calls, which I have heard from business organisations such as the British Retail Consortium and the Association of Convenience Stores, whose conference I addressed. They would like a complete overhaul of the system. I have invited them to put their thinking caps on and to come up with some thoughts on longer-term radical reform of the system. Meanwhile, we have supported the Portas pilots with some £2.3 million. We have supported towns with high vacancy rates through the high street innovation fund and we have supported the “Love your local market” campaign.

We were very pleased to support the first ever small business Saturday. Just under half of UK consumers were aware of small business Saturday and nearly £500 million was spent on that day, an average of £33 per person. Almost one person in five said they had spent at least 50% more than they usually would. The day was supported by more than 100 local authorities who waived parking charges, including that in the hon. Gentleman’s constituency, I am delighted to say. Many of my right hon. and hon. Friends visited small businesses on that day, as I did, and saw their commitment and energy. We were proud to help small business Saturday to be a success.

I know that many in the independent sector are concerned about what looks like unfair competition between large and small, between grocery and other subsectors, between online and offline. We believe that consumers are served by open competition between commercial interests, so Government intervention should never be taken lightly, and any action must be evidence-based, proportionate and reasonable. If the hon. Gentleman has evidence of that not being so, it is a matter for the independent competition authorities.

Retail has always been highly competitive. Retailers are swift to change what they sell, where and how they sell it, and how they operate as businesses if that is what they need to do to drive success. However it is not for the Government to intervene in these matters. Changes in technologies and consumer habits are not something the Government or the House can stop or try to reverse, nor should we. The dividing lines between different subsectors of retail—the hon. Gentleman gave some good examples—are blurring as more and more retailers are innovating to serve customers as best they can.

Small retailers are not immune from these commercial pressures. They must adapt and innovate if they are to survive, and the best of our local stores are doing exactly that by trading online with a high street presence, by offering new products and services to customers, and by simply being the best at what they do in terms of customer service—whatever it takes. If a retailer takes market share from another retailer by doing something new or offering something different, that is the nature of the sector. I assure the hon. Gentleman that many small retailers are doing that and thriving as a result. Of course there are things the Government can do to help. Business rates and the planning system are two of the most obvious areas where the Government have a genuine role to try to help cultivate the spirit of enterprise that runs throughout the sector.

I am grateful to the hon. Gentleman for raising these issues this afternoon, which I assure him are central to the commitment of the Government and the Department for Business, Innovation and Skills to the retail strategy, and to our refreshing of that strategy each successive year, working with the British Retail Consortium and the Association of Convenience Stores. I also assure him that the interests of smaller and local retailers are not being squeezed out.